Question 1

Which of the following does not apply to a firm that has shut down in the short run?

Accepted Answer

A) Variable cost is zero. 
B) Total revenue is zero. 
C) Total cost exceeds total revenue. 
D) Total cost is zero. 
E) Fixed cost is positive. 
A) Variable cost is zero. 
B) Total revenue is zero. 
C) Total cost exceeds total revenue. 
D) Total cost is zero. 
E) Fixed cost is positive.

Question 2

-If the firm in Figure 8-10 sells five units of output,then the price must equal

Accepted Answer

A) $60 
B) $10 
C) $250 
D) $90 
E) $50 
A) $60 
B) $10 
C) $250 
D) $90 
E) $50

Question 3

The demand curve facing a firm acts as a constraint by

Accepted Answer

A) shifting to the left and right as suppliers vary their quantities 
B) showing the maximum price that could be charged to sell a specific output level 
C) showing the minimum quantity of output that a firm needs to produce at a specific price 
D) limiting sales to those who are first in line when the product is distributed 
E) relating the actions and decisions of buyers and sellers in the market 
A) shifting to the left and right as suppliers vary their quantities 
B) showing the maximum price that could be charged to sell a specific output level 
C) showing the minimum quantity of output that a firm needs to produce at a specific price 
D) limiting sales to those who are first in line when the product is distributed 
E) relating the actions and decisions of buyers and sellers in the market

Question 4

If a firm is able to cover its variable costs by operating in the short run then,at its best output level,the

Accepted Answer

A) marginal revenue is equal to marginal cost 
B) vertical distance between MR and MC is maximized 
C) vertical distance between TR and TC is minimized 
D) marginal cost curve lies above the marginal revenue curve 
E) marginal cost curve is minimized 
A) marginal revenue is equal to marginal cost 
B) vertical distance between MR and MC is maximized 
C) vertical distance between TR and TC is minimized 
D) marginal cost curve lies above the marginal revenue curve 
E) marginal cost curve is minimized

Question 5

-Figure 8-13 shows a firm's total variable cost and total revenue curves.In the short run,this firm

Accepted Answer

A) should shut down 
B) should produce all units of output for which marginal cost exceeds marginal revenue 
C) should produce at the output level where the marginal cost curve crosses the marginal revenue curve from below 
D) should produce at the output level where the marginal cost curve crosses the marginal revenue curve from above 
E) needs additional information in order to decide whether to operate 
A) should shut down 
B) should produce all units of output for which marginal cost exceeds marginal revenue 
C) should produce at the output level where the marginal cost curve crosses the marginal revenue curve from below 
D) should produce at the output level where the marginal cost curve crosses the marginal revenue curve from above 
E) needs additional information in order to decide whether to operate

Question 6

If a firm's short-run total cost curve lies above its total revenue curve at all output levels,the goal of the firm should be to

Accepted Answer

A) minimize total cost 
B) maximize total revenue 
C) minimize its loss 
D) minimize marginal cost 
E) maximize marginal revenue 
A) minimize total cost 
B) maximize total revenue 
C) minimize its loss 
D) minimize marginal cost 
E) maximize marginal revenue

Question 7

Profit is the payment for

Accepted Answer

A) land and labor 
B) risk taking and innovation 
C) capital and labor 
D) risk taking and capital 
E) all of the factors of production 
A) land and labor 
B) risk taking and innovation 
C) capital and labor 
D) risk taking and capital 
E) all of the factors of production

Question 8

Whenever marginal cost exceeds marginal revenue,

Accepted Answer

A) profit declines if the firm reduces output 
B) profit increases if the firm increases output 
C) the firm should shut down 
D) losses decrease if the firm increases output 
E) profit declines if the firm increases output 
A) profit declines if the firm reduces output 
B) profit increases if the firm increases output 
C) the firm should shut down 
D) losses decrease if the firm increases output 
E) profit declines if the firm increases output

Question 9

-Figure 8-4 indicates data for the total cost curve and the demand curve facing Jonathan's Riding Mower Shop.The quantities indicated are potential daily sales.Jonathan's profit-maximizing sales level is

Accepted Answer

A) 8 or 9 units 
B) 5 units 
C) 10 units 
D) 6 units 
E) 7 units 
A) 8 or 9 units 
B) 5 units 
C) 10 units 
D) 6 units 
E) 7 units

Question 10

A firm may find it optimal to stay in business in the short run even if total revenue does not cover total cost.

Accepted Answer

A) True 
 B)False

Question 11

Economic analysis assumes that,for each output level,the firm

Accepted Answer

A) operates at minimum point of its average total cost curve 
B) operates at minimum point of its long-run average total cost curve 
C) seeks lowest possible cost of producing that quantity of output 
D) produces at maximum point of its total revenue curve 
E) produces at maximum point of its total product curve 
A) operates at minimum point of its average total cost curve 
B) operates at minimum point of its long-run average total cost curve 
C) seeks lowest possible cost of producing that quantity of output 
D) produces at maximum point of its total revenue curve 
E) produces at maximum point of its total product curve

Question 12

If Carol's Crayon Factory's price exceeds its average total cost in the short run,then

Accepted Answer

A) it should shut down 
B) it is earning a profit 
C) profits are being maximized 
D) it should increase output 
E) it should decrease output 
A) it should shut down 
B) it is earning a profit 
C) profits are being maximized 
D) it should increase output 
E) it should decrease output

Question 13

In the short run,if a firm's total variable cost curve lies everywhere above its total revenue curve,the firm should produce

Accepted Answer

A) the output level that minimizes average total cost 
B) the output level that minimizes average variable cost 
C) the output level that minimizes the distance between marginal cost and marginal revenue 
D) the output level that maximizes the distance between marginal cost and marginal revenue 
E) no output 
A) the output level that minimizes average total cost 
B) the output level that minimizes average variable cost 
C) the output level that minimizes the distance between marginal cost and marginal revenue 
D) the output level that maximizes the distance between marginal cost and marginal revenue 
E) no output

Question 14

If marginal revenue for a firm is negative,

Accepted Answer

A) marginal cost must also be negative 
B) total revenue will decrease if the firm sells more output 
C) total revenue must also be negative 
D) the firm should shut down in the short run 
E) the lost revenue from having to lower its price is less than the additional revenue from higher sales 
A) marginal cost must also be negative 
B) total revenue will decrease if the firm sells more output 
C) total revenue must also be negative 
D) the firm should shut down in the short run 
E) the lost revenue from having to lower its price is less than the additional revenue from higher sales

Question 15

When a firm faces a downward-sloping demand curve,marginal revenue

Accepted Answer

A) is constant regardless of how much output the firm produces 
B) is less than price 
C) increases as the firm produces more output 
D) decreases if the firm produces less output 
E) is equal to the price per unit of output 
A) is constant regardless of how much output the firm produces 
B) is less than price 
C) increases as the firm produces more output 
D) decreases if the firm produces less output 
E) is equal to the price per unit of output

Question 16

Economists assume that the goal of the firm is to

Accepted Answer

A) maximize total revenue 
B) maximize profits 
C) minimize costs 
D) equate total revenue and total cost 
E) break even in the long run 
A) maximize total revenue 
B) maximize profits 
C) minimize costs 
D) equate total revenue and total cost 
E) break even in the long run

Question 17

According to the marginal approach to profit maximization,firms should increase output as long as total revenue is rising.

Accepted Answer

A) True 
 B)False

Question 18

-Figure 8-3 shows the total revenue and total cost for a firm at selected output levels.Which is the highest possible level of profit for this firm over this output range?

Accepted Answer

A) $500 
B) $2,100 
C) $1,600 
D) -$500 
E) $300 
A) $500 
B) $2,100 
C) $1,600 
D) -$500 
E) $300

Question 19

As long as the marginal revenue curve lies above the horizontal axis,

Accepted Answer

A) total revenue must exceed total cost 
B) the total revenue curve must have a positive slope 
C) marginal revenue must exceed marginal cost 
D) profit must be rising 
E) the firm must be earning a profit 
A) total revenue must exceed total cost 
B) the total revenue curve must have a positive slope 
C) marginal revenue must exceed marginal cost 
D) profit must be rising 
E) the firm must be earning a profit

Question 20

If a firm minimizes its losses by shutting down in the short run,then at all other output levels,

Accepted Answer

A) variable cost would exceed total revenue 
B) total revenue exceeds total cost 
C) marginal revenue exceeds marginal cost 
D) total cost is zero 
E) total revenue is zero 
A) variable cost would exceed total revenue 
B) total revenue exceeds total cost 
C) marginal revenue exceeds marginal cost 
D) total cost is zero 
E) total revenue is zero

Which of the following does not apply to a firm that has shut down in the short run?

-If the firm in Figure 8-10 sells five units of output,then the price must equal

The demand curve facing a firm acts as a constraint by

If a firm is able to cover its variable costs by operating in the short run then,at its best output level,the

-Figure 8-13 shows a firm's total variable cost and total revenue curves.In the short run,this firm

If a firm's short-run total cost curve lies above its total revenue curve at all output levels,the goal of the firm should be to

Profit is the payment for

Whenever marginal cost exceeds marginal revenue,

-Figure 8-4 indicates data for the total cost curve and the demand curve facing Jonathan's Riding Mower Shop.The quantities indicated are potential daily sales.Jonathan's profit-maximizing sales level is

A firm may find it optimal to stay in business in the short run even if total revenue does not cover total cost.

Economic analysis assumes that,for each output level,the firm

If Carol's Crayon Factory's price exceeds its average total cost in the short run,then

In the short run,if a firm's total variable cost curve lies everywhere above its total revenue curve,the firm should produce

If marginal revenue for a firm is negative,

When a firm faces a downward-sloping demand curve,marginal revenue

Economists assume that the goal of the firm is to

According to the marginal approach to profit maximization,firms should increase output as long as total revenue is rising.

-Figure 8-3 shows the total revenue and total cost for a firm at selected output levels.Which is the highest possible level of profit for this firm over this output range?

As long as the marginal revenue curve lies above the horizontal axis,

If a firm minimizes its losses by shutting down in the short run,then at all other output levels,

What Is Economics

Scarcity, choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

Elasticity

Consumer Choice

Production and Cost

Perfect Competition

B:Perfect Competition

Monopolistic Competition and Oligopoly

Monopoly

Labor Markets

B: Labor Markets

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

Filters

Exam 8: How Firms Make Decisions: Profit Maximization

Which of the following does not apply to a firm that has shut down in the short run?

-If the firm in Figure 8-10 sells five units of output,then the price must equal

The demand curve facing a firm acts as a constraint by

If a firm is able to cover its variable costs by operating in the short run then,at its best output level,the

-Figure 8-13 shows a firm's total variable cost and total revenue curves.In the short run,this firm

If a firm's short-run total cost curve lies above its total revenue curve at all output levels,the goal of the firm should be to

Profit is the payment for

Whenever marginal cost exceeds marginal revenue,

-Figure 8-4 indicates data for the total cost curve and the demand curve facing Jonathan's Riding Mower Shop.The quantities indicated are potential daily sales.Jonathan's profit-maximizing sales level is

A firm may find it optimal to stay in business in the short run even if total revenue does not cover total cost.

Economic analysis assumes that,for each output level,the firm

If Carol's Crayon Factory's price exceeds its average total cost in the short run,then

In the short run,if a firm's total variable cost curve lies everywhere above its total revenue curve,the firm should produce

If marginal revenue for a firm is negative,

When a firm faces a downward-sloping demand curve,marginal revenue

Economists assume that the goal of the firm is to

According to the marginal approach to profit maximization,firms should increase output as long as total revenue is rising.

-Figure 8-3 shows the total revenue and total cost for a firm at selected output levels.Which is the highest possible level of profit for this firm over this output range?

As long as the marginal revenue curve lies above the horizontal axis,

If a firm minimizes its losses by shutting down in the short run,then at all other output levels,

What Is Economics

Scarcity, choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

Elasticity

Consumer Choice

Production and Cost

Perfect Competition

B:Perfect Competition

Monopolistic Competition and Oligopoly

Monopoly

Labor Markets

B: Labor Markets

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

Filters